I often refer back to Michael Porter’s Five Forces of Competitive Position when looking at how to maximise a food company’s power. One of these forces focussed on competitive rivalry - how many other people can make what you do and as well? In many food businesses the barrier to entry is low – how many chutney and drinks suppliers do you see at food exhibitions such as Lunch! And Speciality fine food fair? If there are many in a category, then your power is weaker as the buyer has many alternatives whether that is the retailer or the actual consumer
The marketers and strategists talk about creating the USP (unique selling point) – for which the theory is if no one else can do what you do, then you can often have tremendous strength. Which of course is where brands come in, Coca cola is still brand leader and remains listed every major retailer – sugar or no sugar campaign!!
The unique selling point was a concept created by Rosser Reeves back in 1960 which was aimed at helping advertisers understand how to boost their sales through identifying the benefits of their products. You take the features of your product turn them into benefits and off you go – market a unique selling point…in theory
In practice, this is not so robust especially in the food industry where there is much commoditisation. Nielsen published an interesting report “The state of private label around the world” 2014 which showed that the more commoditisation there is in a category, the more likely there will be own label and lower prices. In an effort to differentiate, food businesses put the emphasis on quality and investing in operational effectiveness. This can be a short term competitive advantage but soon someone can copy your new manufacturing process, your use of new ingredient or exclusive packaging concepts. Imitation is sincerest form of flattery but extremely annoying if you are trying to grow your food sales!!
Price is my least form of competitive advantage – tendering for business with a retailer is the worse possible way of developing business – if you have created something special then people should be prepared to pay for it – otherwise frankly what is the point –we are in business to make a profit not be busy fools. It Is possible to differentiate with higher price but you need to be able to justify that price either through better quality or uniqueness – Marmite is £1 per 100g compared to 50p per 100g for Sunpat peanut butter and 40-60p for brands of jam. Jam and peanut butter have become commodities but there really is only one marmite – regardless whether you love it or not! But Pip n nut have come in with a new brand and great product – coconut and almond butter that commands £1.58 per 100g in Sainsbury’s.
So what have Pip n nut done? They have taken a commodity market and created a yummy scrummy product that is bang on trend and quirky and fun – and people will pay for it – indeed I have paid for it – delicious product.
So what do we do?? Jack Trout in his great book “differentiate or die” suggests four steps to creating a differentiated product that in turn will give you strength and power.
4 Communicate your difference – it is said that you should put the customer at the heart of everything you do but you also need to put your point of difference – your USP - at the heart of your business as well. Everyone from the shop floor to the MD needs to understand the company strategy and the point of difference you are pursuing. Porter advocates that this is a long term point of difference – even though we are in an ever changing world for which change is the norm – consistency of strategy and message is critical to ensure that your customer and consumer gets your business. How this is communicated depends on your budget, type of business and customer base.
So call it what you will – differentiation, USP, competitive advantage – the impact is the same – if you can develop and maintain a uniqueness then you have a stronger position of power in the market place. It makes negotiations easier, position on shelf, sales growth and ultimately profitability.
So how can I help you find that source of product power – whether it already inherently exists in your business or needs to be teased out? Give me a ring on 0115 714 1965 or email on firstname.lastname@example.org and we can talk about what makes your business unique and how to leverage that effectively and profitably.
Last updated: 11th April 2016